Monday 5 December 2016

Bluechip Dublin stores lure real estate tycoons

Grafton Street was hammered in the crash, but now big investors eye a return to the glory days

Published 10/05/2015 | 02:30

LONG-TERM BET: Vacancy rates in Grafton Street are low
LONG-TERM BET: Vacancy rates in Grafton Street are low

Ireland's most famous street is booming again.

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Five years ago, Grafton Street was in crisis. West, the iconic jewellers where skilled goldsmiths had once fashioned exact copies of the Tara Brooch for Queen Victoria, brought down the shutters for the last time and the street was pockmarked with vacant units and blighted with billboards advertising units for sale and rent.

As West closed in 2010, respected jeweller Robert Halpin witheringly pinpointed the exact moment the great shopping street had slipped into decline.

"It was the day you no longer had to use a knife and fork to eat on Grafton Street," he observed in a tart comment on the arrival of fast-food outlets.

Now Grafton Street is back. A megabuck sale of bluechip retail locations announced last week is no fire sale but an opportunity to reap a profit in a rising market and includes the building where McDonalds is the anchor tenant.

Royal London Asset Management, (formerly Royal Liver Assurance) is planning to offload eight retail investments and five office assets with an overall value of €118m.

It includes a variety of top locations on Grafton Street, Henry Street, Dawson Street, O'Connell Street, Westmoreland Street as well as Patrick Street in Cork and comes at a time when property values in prime city centre locations have recovered strongly since early last year. The Sovereign Portfolio, which is now on the market with CBRE, is producing an overall rent roll of €7,412,200 per annum - a healthy net return of around 6pc.

Damien O'Reilly, lecturer in retail management at Dublin Institute of Technology, told the Sunday Independent that many funds which came into Ireland some 15 to 20 years ago now see an opportunity to be able to sell their portfolios off with a reasonable return.

"You can see in the market that retail properties that are selling well. Most in demand are those which are in the best locations like Grafton Street and Henry Street. Investors are attracted to those areas because they are performing better than units in the secondary and tertiary street - even though they may just be around the corner," he said.

He said that consumer confidence was improving but retail sales have stabilised rather than boomed.

"But as far as investors are concerned, retail units in the main shopping areas like Grafton Street and Henry Street are still considered the best long-term bet," he said.

However, Sean Murphy of Retail Excellence Ireland (REI) sounded a note of caution.

"Retailers tell us, and investors are also aware that, the retail return in Ireland is still pretty flat," he said.

Mr Murphy pointed to the Grafton Street 'premium'.

"Vacancy rates in places like Grafton Street are very low and there is a strong desire among certain brands to be on Grafton Street but in terms of the overall market there have been successive quarterly reports by the Central Statistics Office (CSO) and monthly reports from ourselves that have proven that while the overall environment is more benign, it is coming off a very low base after more than seven years of collapse in retail demand," he said.

Mr Murphy pointed to new research by REI which analysed the "health" of shopping centres around the country as far as retailers are concerned.

Stillorgan Shopping Centre is considered the most healthy in Ireland, according to retailers, because it is productive, rents are sustainable, new shops have increased footfall, there is free car parking and an affluent population on the doorstep.

Just before the crash there were plans to redevelop the Stillorgan centre, which were halted when the economy imploded. It has turned out to be a blessing in disguise.

"This was a shopping centre which missed the excesses of the boom because the redevelopment plans were scuppered by the crash. It meant that rents stayed competitive and there's been an influx of interesting new shops," he said.

The report found some of the sheen has come off the primary M50 schemes around Dublin with consumers becoming tired of "commoditised formats" and shoppers are now willing to travel greater distances for "weekend experiences". Dundrum Town Centre and Blanchardstown Centre were deemed next most healthy. However, for retailers, Dundrum Town Centre scored poorly from a profitability perspective. Retail sales rose by 1.4pc in March bolstered by new car sales and a better performing hospitality sector.

However, when motors are excluded, there was actually a decrease of 1pc in sales for March. The sector has still to fully regain lost ground.

Sunday Independent

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